Q out, turnaround story?
GASFRAC Announces First Quarter 2014 Results
GASFRAC Energy Services Inc.
CALGARY, ALBERTA--(Marketwired - May 7, 2014) - GASFRAC Energy Services Inc. (GFS.TO) -
COMPARATIVE QUARTERLY FINANCIAL INFORMATION
|
March 31 2014 |
|
March 31 2013 |
|
March 31 2012 |
|
|
CAD$ |
|
CAD$ |
|
CAD$ |
|
|
|
|
|
|
|
|
| Revenue |
12,173 |
|
31,458 |
|
44,969 |
|
| Operating expenses |
16,467 |
|
26,044 |
|
35,243 |
|
| Selling, general and administrative expenses |
4,319 |
|
4,643 |
|
5,997 |
|
| Adjusted EBITDA(1) |
(6,468 |
) |
468 |
|
2,259 |
|
| (Loss) for the period |
(14,169 |
) |
(7,884 |
) |
(4,926 |
) |
| (Loss) per share - basic |
(0.22 |
) |
(0.12 |
) |
(0.08 |
) |
| (Loss) per share - diluted |
(0.22 |
) |
(0.12 |
) |
(0.08 |
) |
| Weighted average number of shares - basic |
63,610 |
|
63,472 |
|
62,496 |
|
| Total assets |
219,509 |
|
257,002 |
|
331,130 |
|
| Total non-current liabilities |
36,908 |
|
35,625 |
|
35,828 |
|
| Revenue days |
25 |
|
73 |
|
84 |
|
| Revenue per revenue day |
487 |
|
431 |
|
535 |
|
| (1) Defined under Non-IFRS Measures |
OVERVIEW OF THE QUARTER ENDED MARCH 31, 2014
While our two major customers were inactive during the quarter, activity for the Canadian customer recommenced in April. In the U.S., our customer has indicated its intent to recommence in early June with a six well pad. Highlights from the quarter were:
- Six field trials completed with five new customers.
- Hiring of a new President with a strong sales focus.
- Sale of $9.3 million of equipment.
- Winning Gold for the 2014 Edison Award in Energy & Sustainability.
- Continued broadening of fluid offering.
- Prototyping of our high reid vapour pressure ("HRVP") system for in-field fluids.
- Bank debt, net of cash, reduced to $13.1 million.
FINANCIAL OVERVIEW - FOR THE THREE MONTHS ENDED
|
March 31, 2014 |
|
Canada |
U.S. |
Corporate |
Total |
|
CAD$ |
|
CAD$ |
|
CAD$ |
CAD$ |
|
|
|
|
|
|
|
|
|
| Revenue |
12,159 |
100.0% |
14 |
100.0% |
|
12,173 |
100.0% |
|
|
|
|
|
|
|
|
| Cost of sales |
8,719 |
71.7% |
10 |
71.4% |
- |
8,729 |
71.7% |
| Variable operating costs |
2,044 |
16.8% |
232 |
1657.1% |
- |
2,276 |
18.7% |
| Fixed operating costs |
3,627 |
29.8% |
1,835 |
13107.1% |
- |
5,462 |
44.9% |
| Operating expenses |
14,390 |
118.3% |
2,077 |
14835.7% |
- |
16,467 |
135.3% |
|
|
|
|
|
|
|
|
| Selling, general and administration |
2,392 |
19.7% |
679 |
4850.0% |
1,248 |
4,319 |
35.5% |
|
|
|
|
|
|
|
|
| Number of revenue days |
25 |
|
0 |
|
|
25 |
|
| Revenue per day |
486 |
|
N/A |
|
|
487 |
|
|
|
|
March 31, 2013 |
|
Canada |
U.S. |
Corporate |
Total |
|
CAD$ |
|
CAD$ |
|
CAD$ |
CAD$ |
|
|
|
|
|
|
|
|
|
| Revenue |
28,462 |
100.0% |
2,996 |
100.0% |
|
31,458 |
100.0% |
|
|
|
|
|
|
|
|
| Cost of sales |
14,590 |
51.3% |
1,641 |
54.7% |
- |
16,231 |
51.6% |
| Variable operating costs |
2,840 |
10.0% |
819 |
27.3% |
- |
3,659 |
11.6% |
| Fixed operating costs |
3,891 |
13.7% |
2,263 |
75.5% |
- |
6,154 |
19.6% |
| Operating expenses |
21,321 |
79.4% |
4,723 |
157.6% |
- |
26,044 |
82.8% |
|
|
|
|
|
|
|
|
| Selling, general and administration |
2,661 |
9.3% |
1,187 |
39.6% |
795 |
4,643 |
11.8% |
|
|
|
|
|
|
|
|
| Number of revenue days |
65 |
|
8 |
|
|
73 |
|
| Revenue per day |
438 |
|
375 |
|
|
431 |
|
Revenue
Revenue for the first quarter decreased 61.3% to $12.2 million from $31.5 million in the first quarter of 2013. This decrease is primarily due to two major customers delaying projects from first quarter of 2014 to second quarter 2014. These two customers contributed approximately $18 million in revenue during first quarter 2013.
During the quarter, the Company earned revenues from six customers with the top three customers representing 86.1% of the total revenue. During the first quarter of 2013, the top three customers represented 83.1% of the total revenue.
Canadian Operations
First quarter revenue from the Canadian operations decreased 57.3% to $12.2 million from $28.5 million in the first quarter of 2013. The Canadian operations performed 25 revenue days in the first quarter of 2014 with average daily revenue of $486 compared to 65 revenue days in the first quarter of 2013 with average daily revenue of $438. The increase in average daily revenue is due to the increase in the price and cost of LPG. During the first quarter of 2014, a repeat customer provided $7.4 million in revenue compared to $6.4 million in the first quarter of 2013. The remaining $4.8 million in revenue was contributed by five new customers.
During the quarter, revenue was generated from six customers with the top three customers representing 86.1% of the total revenue. During the first quarter of 2013, the top three customers represented 91.9% of the total revenue.
U.S. Operations
First quarter revenue from the U.S. operations was nil compared to $3.0 million in the first quarter of 2013. In the first quarter of 2013, GASFRAC performed 8 revenue days with average daily revenue of $375. The Company's major US customer contributed approximately half of the $3.0 million in revenue in first quarter 2013. This customer is expected to re-start in second quarter of 2014. The Company and the customer are currently negotiating a renewal to the contract that expired in first quarter of 2014. However, there can be no assurance at this time that such renewal will be obtained or, if obtained, what the terms of such renewal will be.
During the first quarter of 2013, revenue was generated from three customers with the top customer generating 52.6% of the total revenue.
Operating Expenses
Operating expenses consist of the following categories:
- cost of sales (variable costs directly attributable to a fracturing treatment),
- variable operating costs (variable costs not directly attributable to a fracturing treatment), and
- fixed operating costs (costs that do not fluctuate with the Company's level of activity).
During the quarter, the Company's operating expenses decreased 36.8% to $16.5 million (135.3% of revenue) from $26.0 million (82.8% of revenue) in the first quarter of 2013. This is primarily due to the decrease in the Company's activity.
As a percentage of revenue, cost of sales increased to 71.7% of revenue ($8.7 million) from 51.6% ($16.2 million) of revenue in the first quarter of 2013. The increase in cost of sales as a percentage of revenue was largely attributable to lowering the price of our services in order to attract new customers.
As a percentage of revenue, variable operating expenses increased to 18.7% of revenue ($2.3 million) from 11.6% of revenue ($3.7 million) of revenue in the first quarter of 2013. The percentage increase in variable operating expenses is due to selling services at a reduced price.
Fixed operating costs decreased 11.2% to $5.5 million in the first quarter of 2014 as compared to $6.2 million in the first quarter of 2013. The decrease in fixed operating costs is due to a reduction in salaries and benefits realized from operating headcount decreases.
Canadian Operations
Total operating expenses for the quarter were $14.4 million (cost of sales - $8.7 million, variable operating costs - $2.0 million and fixed operating costs - $3.6 million) as compared to $21.3 million (cost of sales - $14.6 million, variable operating costs - $2.8 million and fixed operating costs - $3.9 million) in the first quarter of 2013.
Cost of sales were 71.7% of revenue for the quarter as compared to 51.3% of revenue in the first quarter of 2013. The increase in cost of sales as a percentage of revenue was largely attributable to lowering the price of our services in order to attract new customers.
Variable operating expenses increased to 16.8% of revenue ($2.0 million) from 10.0% of revenue ($2.8 million) in the first quarter of 2013. The percentage increase in variable operating expenses is due to selling services at a reduced price.
Fixed operating costs decreased to $3.6 million from $3.9 million in the first quarter of 2013. The decrease is due to a reduction in salaries and benefits realized from operating headcount decreases.
U.S. Operations
Total operating expenses for the quarter were $2.1 million (cost of sales - $nil, variable operating costs - $0.2 million and fixed operating costs - $1.8 million) as compared to $4.7 million (cost of sales - $1.6 million, variable operating costs - $0.8 million and fixed operating costs - $2.3 million) in the first quarter of 2013.
Variable operating costs of $0.2 million increased to 100.0+% of revenue from 27.3% of revenue ($0.8 million) in the first quarter of 2013. The variable operating costs primarily consist of repairs and maintenance, shop supplies and fuel incurred to maintain our fleet.
Fixed operating costs decreased to $1.8 million from $2.3 million in the first quarter of 2013. The decrease in fixed operating costs is due to a reduction in salaries and benefits realized from operating headcount decreases.
Sales, General & Administrative ("SG&A") Expenses
For the first quarter, SG&A expenses decreased 7.0% to $4.3 million from $4.6 million in the first quarter of 2013. The decrease is primarily due to decreased salaries and benefits associated with the reductions of the executive and administrative staffing levels. These savings were offset by approximately $0.3 million in severance costs incurred in the first quarter of 2014.
Gain on Disposition of Assets
During the first quarter of 2014, the Company sold certain parked equipment for proceeds of $9.3 million and a book gain of $1.6 million. The proceeds were used to pay down existing bank debt. The equipment sold was in excess of the Company's current needs and does not affect the Company's revenue generating capabilities. The Company did not have a formal plan to dispose of the equipment, however, when the Company was approached it made the decision to sell.
Adjusted EBITDA
For the first quarter of 2014, Adjusted EBITDA decreased to a loss of $6.5 million from $0.5 million in the first quarter of 2013. The Adjusted EBITDA includes the gain on disposal of assets of $1.6 million. The decrease in Adjusted EBITDA was the result of a 61.3% decrease in revenue as well as an increase in the cost of sales.
Net Loss
For the first quarter of 2014, the net loss increased to $14.1 million compared to a net loss of $7.9 million during the first quarter of 2013. As discussed above, the decrease in revenue is the largest contributor to the increase in net loss. Depreciation and amortization decreased $0.3 million from first quarter 2013 to first quarter 2014 due to the sale of assets and minimal capital expenditures throughout 2013. Finance costs also decreased by approximately $0.4 million as a result of lower overall debt levels in first quarter 2014. The Company does not recognize any current tax expense as it has tax losses to offset any taxable income.